Same data, different conclusions; Fischer as VC, tapering as tightening, the S&P a year from now

Market Recap

Market RecapCollective Intelligence!

Same data for all. However, different opinions are reached by traders and that is what helps to make tradeable markets … May the S&P Goddess bless all of us more frequently!  STANLEY FISCHER (NEXT Expected Vice Chair) WILL CONVINCE THE FED TO RAISE RATES EARLIER THAN EXPECTED. MANY THINK FISCHER MAY NOT BE GIVEN THE VICE CHAIR JOB,  BUT OTHERS SAY PRESIDENT OBAMA HAS OFFERED HIM THE JOB AND HE HAS ACCEPTED … YELLEN IS NOT A DOVE, BUT A DEFENDER OF THE DATA … IF FISCHER CONVINCES HER THE DATA IS PRIMED FOR RAISING RATES, SHE WILL GO ALONG.

TAPERING IS TIGHTENING … DON’T BE FOOLED BY THOSE THAT THINK DIFFERENTLY.  35% CHANGE OF TAPERING DECISION FOR DECEMBER AT THIS WEEK’S MEETING … (MOST) DON’T SEE A TAPERING UNTIL NEXT YEAR, BUT THINK A CALENDAR WILL BE ANNOUNCED (SOON). TAPERING IS NOT EVEN CLOSE TO BEING BUILT IN … ( MANY suggesting) VOLATILITY WILL CONFIRM THAT YOU CAN’T BUILD IN TO THE MARKETS (WITH CERTAINTY) SOMETHING YOU HAVE NEVER SEEN – SOURCE.

Profit Warnings – Ratio of Negative Guidance to Positive Is Highest Since 2006 – WSJ.

Barron’s Cover Story: Barron’s surveyed ten sell side analysts who, on average, think the SPX will close 2014 around 1977 w/upside being driven by improving corporate earnings and a strengthening economy (GDP ~2.7% in 2014). Positive mentions: [RIO], [HD], [JPM], [ORCL], [NOC], [GM], [MCK], [ULTI], [LYB], [XOM], [CAT], [CSCO].

The flash PMI data in China mildly disappoints; however, the global equities reverse the recent momentum following the strength in the European data and the slight miss in the U.S. data, 54.4 vs exp of 54.7 while continuing to run well above the 50 level – between expansion versus contraction. Later, New York’s Empire State manufacturing report showed new orders checking in at 0.98 vs exp of 4.75.  *Did somebody say something about “data-dependent”?

Today started with 367k ESH and 900 SPH traded on Globex, ESH trading range was 1779.50 – 1754.00. Friday’s regular trading hours range was 1780.50 – 1772.00 before settling at 1774.70, down 0.2 handle.  In today’s RTH, pit session the March S&P 500 futures gapped 9 handles higher to  1787.50 – 1778.00 and was a whopping 23.5 handles above the Globex low! The opening range marked the early low before grinding almost 9 handles higher to 1786.20 and then backing and filling the pit session gains.  Posted last Thursday, **On the cash close the December futures traded 1775.30 area, before settling at 1774.90, down 5.9  handles on the day – as we come into one of our favored patterns – the low trade made the Thursday or Friday the week before the expiration. But we still have a ways to go before the week’s end – and today’s sideways trade in the middle of todays pit session range reminded us of just how long away that is …. Oh, and the FOMC decision and THE PRESSER, which should clear the runway for the year-end shenanigans!

*PIT BULL (08:43) mid month money today ???? B_will (08:49) Remember stock and options exhibited unusual volatility a week or so back … william_blount (09:50) wouldn’t be surprised if both hi and lo are in place today — normal would give the bulls the best shot of taking out the high.  **william_blount (11:01) bulls want 1787.5 late, bears need 1778.5 killed. Well, buy programs, buy stops and most of all the newly minted shorts over the last week or so primed the rally during the European hours. By the time we opened all they gave us for pre-Christmas … was a test of the 10-handle rule http//dev.mrtopstep.com/trading-101/ as well as a downside retest of the 10-handle rule on the subsequent midday retest and hold of the opening range.

Out in the cold – for now … Sam_E (09:41) bears want this to be a technical perfect abc down now to 1734 were it not exp week i would say its about 110% guaranteed.

By 2:00 the VIX was trading up modestly while the SPH was trading 1782 area when (14:00) MrTopStep MiM Closing Imbalance was showing a very small 52%, $38M to the buy side. At (14:20) the MiM was showing  50%, just $4M to buy while the index was trading 1781 area and I rubbed my eyes three times and said “tell me it ain’t so”… as the 1780 area held as support – in the March contract though – LOL!  By (14:40) the MiM showed a flip to the sell side 51%, and $42M. On the cash close the March futures traded 1780.20 area, before settling at 1780.30, up 11.8 handles on the day.

In a few days there will be three important changes: First, when 2013 is in fact over, and investors look at their returns, if stocks are indeed up +25% and treasuries show losses, there will be a tendency, given that many investors are underweight equities, to rebalance toward equities. In addition, investors may notice that in the years following +25% years, the stock market has done well. And investors will see that “experts” are forecasting the S&P at around 2,000 for the year-end 2014 (see the ten experts in this weekend’s Barron’s with a range of 1,900 to 2,100).

Second, when 2013 is in fact over, investors will see five-year performance numbers surge from zero for 2008-2012 to +100% for 2009- 2013 (cumulative price performance for the S&P). And investors may take note that the last time there was a surge like this, the stock market did well the following year (surge 1978 to 1979, followed by the S&P increasing +26% in 1980).

Third, many financial players are expected to have a forecast for “next year”, which today is 2014. In 17 days, “next year” will be 2015! The ten experts in Barron’s this weekend have S&P earnings of $119 on average (nobody was asked for 2015 forecasts). Given this central tendency of $119 for 2014, the central tendency for 2015 will be $125, a +5% increase. That will put the forward P/E at 14x. If investors start to put an 18x P/E on $125, then thoughts of 2,250 will come to mind – Source.

The quarterly share rebalance for the S&P 500, S&P MidCap 400, S&P SmallCap 600 indices. S&P 500: The total trade size of the rebalance is estimated at $ 15.1 billion per side with a two-way turnover of 1.55%. The largest weight increases are [FB] (Add), [ADS] (Add), [MHK] (Add), [GM] (S Inc & F Inc), [PXD] (S Inc). The largest weight decreases are [AAPL] (S Dec), [PFE] (S Dec), [XOM] (S Dec), [TER] (Delete), [JDSU] (Delete).  In the S&P 500, I. Technology and Utilities will see the largest inflows of $ 9020 million and $ 29 million, respectively http://pastebin.com/6mYynQCu

Still garnering some chatter from  12-9-13  > St. Louis Fed’s Bullard Discusses Tapering, Forward Guidance and Fed Communications  http://bit.ly/18PJZ7H

Know thy Fed speakers: http://graphics.thomsonreuters.com/F/10/scale.swf

POMO Schedule: http://bit.ly/1fqTRnu

POMO = Permanent Open Market Operation http://bit.ly/19mBezZ

Coming events: http://www.investing.com/economic-calendar/

Homework 9. Interesting study, w/daily performance http://www.linnsoft.com/homework/

Posted last Thursday & Friday:  … On the cash close the December futures traded 1775 area, before settling at 1774.70, down .2 handles on the day – as we come into one of our favored patterns – the low trade made the Thursday or Friday the week before the expiration.

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